ART Has Come Out with a New and Improved Product

question 38

Multiple Choice

ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3 per share. Investors expect a 12% rate of return on the shares. At what price would you expect ART to sell?

• A)$25.00
• B)$34.29
• C)$42.86
• D)$45.67

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